A business is a legal entity that is set-up or designed to make goods, sell goods, or provide a service. Many businesses are for-profit organizations as opposed to a non-profit organization or hobby job. How an organization is structured affects how a business is run, how it is taxed, and how profits are distributed. The actual business structure can also affect the personal liability of any owners of the business.
A profit-based organization is designed, as the name implies, to make a profit. The types of business structures available in every state include sole proprietorship, partners, and corporations .Other hybrids of these types of business entities may vary by state.
State rules control how a business entity can be started and structured .Rules will control how a business entity will be required to pay income taxes. Before you start a business, you should visit with a corporate, business, or tax attorney about the goals of your business so that you structure the business to reduce income taxes and your own personal liability.
Regardless of whether the business is a for-profit or not-for-profit business, a business is generally characterized as running in a systematic, continuous and regular businesslike manner, and having ordinary commercial principles governing it, such as business and accounting records. For example, a person who collects and sells l cards on a regular basis from a store is engaged in a business, while a casual collector, who will occasionally trade cards with friends, is probably engaged
What is a business plan?
A business plan is any plan that works for a business to look ahead, allocate resources, focus on key points, and prepare for problems and opportunities.
Unfortunately, many people think of business plans only for starting a new business or applying for business loans. But they are also vital for running a business, whether or not the business needs new loans or new investments. Businesses need plans to optimize growth and development according to priorities.
What’s a startup plan?
A simple startup plan includes a summary, mission statement, keys to success, market analysis, and break even analysis. This kind of plan is good for deciding whether or not to proceed with a plan, to tell if there is a business worth pursuing, but it is not enough to run a business with.
Is there a standard business plan?
A normal business plan (one that follows the advice of business experts) includes a standard set of elements, as shown below. Plan formats and outlines vary, but generally a plan will include components such as descriptions of the company, product or service, market, forecasts, management team, and financial analysis.
Your plan will depend on your specific situation. For example, description of the management team is very important for investors while financial history is most important for banks. However, if you’re developing a plan for internal use only, you may not need to include all the background details that you already know. Make your plan match its purpose.
What is most important in a plan?
It depends on the case, but usually it’s the cash flow analysis and specific implementation details.
Cash flow is both vital to a company and hard to follow. Cash is usually misunderstood as profits, and they are different. Profits don’t guarantee cash in the bank. Lots of profitable companies go under because of cash flow problems. It just isn’t intuitive.
Implementation details are what make things happen. Your brilliant strategies and beautifully formatted planning documents are just theory unless you assign responsibilities, with dates and budgets, follow up with those responsible, and track results. Business plans are really about getting results and improving your company.
Having the main components, the order doesn’t matter that much, but here’s the outline order we suggest in business plan pro and live plan software:
- Executive summary : Write this last. It’s just a page or two of highlights.
- Company Description: Legal establishment, history, start-up plans, etc.
- Product or Service: Describe what you’re selling. Focus on customer benefits.
- Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc.
- Strategy and Implementation: Be specific. Include management responsibilities with dates and budget.
- Management Team: Include backgrounds of key members of the team, personnel strategy, and details.
- Financial Plan: Include profit and loss, cash flow, balance sheet, break-even analysis, assumptions, business ratios, etc.
Running an organisation
In many ways a organization is similar to a sole trader or partnership, except that it exists as a separate legal entity from the owners (who are called shareholders). This means that in most circumstances, personal assets of the owners cannot be touched to pay for the debts of the organisation.
Most companies fall into two categories, depending on the type of liability that can be imposed on the owners:A company limited by shares, limits the liability of shareholders to the value of their shares. This structure is suitable for most trading businesses and can be a private company or a public company,A company limited by guarantee, most often used by non-trading organisations, for example, sporting clubs.